Renault-Nissan, Daimler eye mutual stakes-sources

By IBT Staff Reporter On 03/26/10 AT 11:08 AM

TOKYO/FRANKFURT - The Renault-Nissan group and Daimler AG are considering taking symbolic stakes in each other and working on bigger joint projects, sources said, in the face of intense pressure to cut costs and develop cleaner cars.

Two sources familiar with the matter said Daimler, the maker of Mercedes-Benz cars, is willing to acquire a small stake of about 3 percent in Renault SA come April, using its own treasury shares as currency to avoid spending any cash.

It remains unclear how junk-rated Renault, worth less than a third of Daimler, would finance the deal, while the Nikkei business daily said Nissan Motor Co was looking to take a stake of 1-2 percent in Daimler.

Renault-Nissan Chief Executive Carlos Ghosn has repeatedly said he is open to a third partner for the 11-year-old Franco-Japanese alliance, and that an equity relationship enabled partners to commit and delve deeper into projects.

Renault's board will meet on April 6 to discuss the partnership with Daimler, Le Figaro newspaper reported on Friday, adding that the deal would be announced to shareholders at the carmakers' annual meetings later in April.

One industry source, who asked not to be identified, said an equity relationship under discussion would form the basis of cooperation through joint purchasing and components sharing. But the source said the option of limiting their partnership to a project-based one was still on the table.

The Financial Times reported on Thursday that Renault and Daimler were close to agreeing a wide-ranging strategic partnership that would include a swap of small stakes between them. It did not mention Nissan as being part of those talks.

All three companies declined to confirm the reports. Nissan is held 44.3 percent by Renault, which owns 15 percent of its Japanese partner.

Carmakers are on the hunt to cut costs by building scale and spreading the load of heavy investments in new technologies such as hybrid and electric vehicles over large numbers of cars.

Renault and Daimler have made no secret of being in talks about cooperating to cut costs, pool technology resources and build scale as the crisis-hit industry tries to become more efficient. Both companies have said they were talking with a wide range of makers.

Daimler is seen as wanting scale benefits by building the Smart four-seater, due towards the end of 2013, that would share its underpinnings with the Renault Twingo, while the German automaker could supply large diesel and gasoline engines for Renault and Nissan.

Although analysts said a partnership among the three to seek operational synergies could be positive, shares in Daimler failed to react much as doubts remained over the actual scale of savings possible.

It could set the stage for the expanded supply of electric vehicles or batteries (by Nissan) to Daimler, JPMorgan Securities analyst Kohei Takahashi wrote in a note.

However, given the failure of numerous past alliances and mergers to meet their stated targets, we caution against excessive expectations for sharp cost reductions through parts sharing until more details become available, he added.

I personally think there aren't a lot of merits for Nissan, said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

Just about the only merit I can see is that it might help make parts procurement less expensive, and maybe open some routes into Europe. But overall the gains for Nissan look rather small, and I think the stock price is reflecting this view.

Analysts also said a deal could fall through, citing speculation that Renault-Nissan's Ghosn was pushing for the equity deal, while his Daimler counterpart Dieter Zetsche was not as keen.

He's (Ghosn) not into living together, he's into getting married. And maybe Daimler is interested in only getting engaged, said CLSA Asia-Pacific Markets analyst Christopher Richter.

One nice thing with this alliance is that nobody would be stepping on anybody's toes, he said, because Mercedes buyers were unlikely to cross-shop against Renault or Nissan cars, and vice-versa.

The auto industry is replete with capital alliances that have floundered or are yielding few or no synergies.

Daimler itself has had numerous failures, with Chrysler, Mitsubishi Motors and Hyundai Motor, although Volkswagen AG and Suzuki Motor Corp made headlines in December to become the latest to seal an equity tie-up.

Mitsubishi Motors ended months of speculation earlier in March by announcing with France's PSA Peugeot Citroen that the two had decided to forego an equity tie-up for now.

Small equity holdings within the industry are also not uncommon: Suzuki Motor and Subaru-maker Fuji Heavy Industries hold a few percent in each other, while Toyota Motor owns 4 percent of Yamaha Motor.

Meanwhile, carmakers have also aggressively sought operational tie-ups without an equity relationship.

Sources have said Japan's Mazda Motor is discussing the possibility of asking Toyota for help in hybrid cars, even though Ford Motor is Mazda's top shareholder with an 11 percent stake.

The Nikkei reported on Friday that Mazda planned to introduce a mid-size hybrid vehicle by 2013 based on core components supplied by Toyota. Mazda shares rose 1.2 percent in afternoon trade, though both companies said nothing had been decided. (Additional reporting by Elaine Lies in TOKYO, Hendrik Sackmann in STUTTGART, and A.Ananthalakshmi in BANGALORE; Editing by Michael Watson and Simon Jessop)